GA20503

INTERNATIONAL FINANCE STATEMENT ANALYSIS

SESSION: 1-2023/2024

CASE STUDY GROUP ASSIGNMENT

DUE DATE:
12 JANUARY 2023

PREPARED FOR:
DR NELSON LAJUNI

PREPARED BY:

NO GROUP MEMBER MATRIX NO

1. DAVENICE UNICE @ YUNIS BG22110073

2. NUR AIFAA BINTI JASON @ ISMAIL BG22110105

3. MOHD FAZLI BIN UMAR BG22110060

4. AISY DANISH BIN ANISWANDY BG22110354

5. MUHAMAD HARUN BIN LASEMANG BG22160609

6. WAHYUDI BIN MASSARAPI BG22110252

7. RAFIZAN BIN YUSOF BG22110287

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Table of Contents

1.0 The strategic capabilities/each of the firms pursues and the company’s quality management
(SWOT) .................................................................................................................................................... 3

2.0 An analysis of the current conditions in the industry and each firm in your industry................... 6

3.0 AN ANALYSIS OF COMPANY PERFORMANCE USING ACCOUNTING AND OTHER RATIOS. ........... 10

4.0 An analysis of company cash flow ................................................................................................. 14

5.0 Evaluate the company’s capital structure (gearing and share ownership) .................................. 18

6.0 Overall on the Performance of the Company ................................................................................ 25

REFFEREENCE ........................................................................................................................................ 32

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1.0 The strategic capabilities/each of the firms pursues and the company’s quality
management (SWOT)
Maxis Berhad
Strengths
1. Extensive Network Infrastructure
Maxis has a well-established and extensive network infrastructure, providing widespread coverage
and ensuring reliable telecommunications services for its customers.

2. Innovative Product and Service Offerings

The company is known for its innovative product and service offerings, including advanced mobile
data plans, digital solutions, and other cutting-edge telecommunications services that cater to diverse
customer needs. For example, Maxis introduced innovative services such as MaxisONE Prime,
combining home and mobile plans for a comprehensive solution. By offering unique and bundled
services, Maxis attracts a diverse customer base and stays ahead in meeting evolving consumer
demands.

3. Brand Recognition and Reputation

Maxis has built a strong brand name and enjoys a positive reputation in the market. This recognition
contributes to customer trust and loyalty. For example, Maxis is widely recognized as a leading
telecommunications provider in Malaysia, with numerous awards for its services. A strong brand
reputation instills trust among customers, influencing their choice of a telecommunications provider.

Weaknesses

1. Network Congestion
Despite having an extensive network infrastructure, Maxis may experience network congestion
during peak usage times, leading to slower data speeds and potential dissatisfaction among users.
Explanation: During peak hours, Maxis may experience network congestion, leading to slower data
speeds and connectivity issues for users. For example, users may encounter difficulties in streaming
videos or experiencing delays in data-intensive activities during busy periods.

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2. Dependence on Economic Conditions
Maxis's revenue and profitability are susceptible to economic conditions. During economic
downturns, customers may reduce spending on telecommunications services, impacting the company's
financial performance.

3. Intense Competition
The telecommunications industry is highly competitive, with several players vying for market share.
Intense competition could lead to price wars and reduced profit margins for Maxis.

Opportunities

1. 5G Technology Adoption
The global rollout of 5G technology presents an opportunity for Maxis to enhance its network
capabilities, providing faster and more reliable services to customers and exploring new revenue
streams. The widespread adoption of 5G technology presents an opportunity for Maxis to offer faster
and more reliable connectivity, catering to the growing demand for high-speed data and enabling
innovations like Internet of Things (IoT). For example, Maxis can invest in upgrading its infrastructure
to provide 5G services, attracting tech-savvy customers and businesses looking for advanced
connectivity solutions.

2. Digital Transformation Services

Offering digital transformation services to businesses and consumers can be a lucrative opportunity.
Maxis can develop and provide solutions that help clients navigate the digital landscape and improve
efficiency. Maxis can capitalize on the trend of digital transformation by offering tailored digital
solutions to businesses, helping them enhance efficiency, productivity, and customer engagement. For
example, providing cloud services, cybersecurity solutions, and digital communication platforms can
position Maxis as a partner in the digital evolution of businesses.

3. Partnerships and Collaborations

Forming strategic partnerships with content providers, technology firms, and other industry players
can enhance Maxis's service offerings and open up new avenues for growth. Collaborating with content
providers for streaming services, gaming, and other digital content can enhance Maxis's offerings and
attract a wider customer base. For example, Maxis can partner with popular streaming platforms or
gaming companies to provide exclusive content or gaming bundles for its subscribers.

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Threats

1. Intense Competition
The telecommunications sector is highly competitive, with numerous providers vying for market
share. Intense competition may lead to price wars, reduced profit margins, and challenges in acquiring
and retaining customers. The presence of multiple telecommunications providers in the market, such as
Celcom, Digi, and U Mobile. Intense competition can lead to price wars, reduced profit margins, and
the need for continuous investment in infrastructure and services to stay competitive.

2. Regulatory Changes
Changes in regulatory policies or the introduction of new regulations can pose challenges for Maxis.
Compliance costs and adapting to evolving legal requirements may impact the company's operations
and financial performance. The introduction of new regulations governing data privacy or spectrum
allocation. Regulatory changes can impact Maxis's operations and require adjustments in compliance,
potentially affecting service offerings and profitability.

3. Technological Disruptions
Rapid advancements in technology could lead to disruptions in the telecommunications industry.
Maxis needs to stay abreast of technological changes to avoid obsolescence and maintain
competitiveness. Rapid advancements in technology making certain infrastructure obsolete. The
telecommunications industry evolves quickly, and failure to adapt to new technologies can result in
Maxis falling behind competitors.

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2.0 An analysis of the current conditions in the industry and each firm in your industry.

According to the data supplied, this report analyses the present condition of Maxis Berhad in
terms of Political, Economic, Social, and Technological factors.

Political:

The present governance system in Malaysia has served its purpose for a long time and I don’t think
much will change in the process even though it may throw up leaders that can lead divergent
policymaking from the historical norm. Maxis must closely monitor the government's industry-wide
initiatives to anticipate developments.

Government resource allocation and time scale. The implementation of Malaysia's new government
policies has the potential to enhance the investment sentiment within the Services sector. Considering
the widespread approval of the proposed policies among the populace, it is reasonable to expect that the
duration of these policies will be beyond the current term of the Malaysian government.

Non-government organizations, protest and pressure groups, and activist movements are important
stakeholders that have a significant influence on policymaking in Malaysia. Maxis should establish a
strong partnership with these organizations to enhance its contributions towards both community
objectives and corporate objectives.

Regulatory Practices, Maxis must manage diverse regulations in the various markets it is present in. In
recent years, Malaysia and other developing economies have implemented regulatory changes that
affect both market access and operational practices of enterprises in the Communications Services
sector within the local market.

Armed Conflict, Malaysia is currently not facing any immediate risks due to the disturbance in the
commercial landscape caused by military strategies, terrorist dangers, and other forms of political
instability. Maxis possesses expertise in managing operations under challenging conditions.

The government of Malaysia has come under increasing global pressure to adhere to the World Trade
Organization’s regulations on the Communications Services industry.

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Economic:

The level of labor competence in the Malaysian market is noteworthy, especially in the Services
business, where it varies from moderate to high. Maxis can make use of this highly competent workforce
by strategically improving its services in Malaysia and utilizing the knowledge of trained workers to
explore international opportunities.

Maxis can strategically leverage Malaysia's efficient financial markets, capitalizing on the dynamic
financial landscape and the abundant liquidity in the Malaysian shares market. This strategic move
places the company in a favorable position to undertake future worldwide expansion endeavors.

Malaysia's economic outlook over the next 5-10 years is expected to be strong, supported by factors
such as continued government spending, consistent consumer demand due to disposable income, and
growing investments in developing sectors.

Although consumer disposable income is stable, there is an anticipated decrease in consumer

expenditure because of the increasing wealth gap in society. This imbalance is expected to negatively
affect consumer mood, hence influencing purchasing behavior.

Anticipated is an increase in the inflation rate inside the Malaysian economy, because of the ample
liquidity present in the market after the significant economic decline experienced in 2018. Maxis, like
other firms, must overcome the hurdles presented by this economic situation.

Maxis must be aware of possible government initiatives in the Services sector, particularly in the
Communications Services division. The operations and trajectory of enterprises in this industry can be
strongly influenced by government actions, and Maxis should take proactive measures to align with
regulatory dynamics.

Social:

Maxis is ready to investigate pioneering ideas that are in line with and endorse the changing societal
norms as Malaysia experiences a significant change in gender roles. By experimenting with different
strategies, Maxis can customize its offerings and services to better meet the evolving needs of Malaysian
society.

Maxis benefits from a favorable demographic situation in Malaysia, as the country has a young and
growing population, which is especially advantageous for its Services goods. Maxis can capitalize on
this demographic trend to expand its range of products and cater to the distinct requirements of different
sectors within the ever-expanding population.
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Maxis recognizes the utmost importance of comprehending societal norms and hierarchy, particularly
due to the unique cultural environment in Malaysia in contrast to its domestic market. By forming a
proficient local staff that is knowledgeable about Malaysian customs and attitudes, Maxis may improve
its capacity to efficiently cater to clients, while cultivating a stronger bond with the local community.

The impact of media platforms, including both conventional and digital media, has a crucial role in
molding public perception in Malaysia. By acknowledging this fact, Maxis may utilize the swift
expansion of these platforms to enhance its marketing tactics and successfully promote its products,
taking advantage of the evolving media environment.

The high levels of education in Malaysia, especially in the Maxi industry, offer a favorable chance for
the organization. Maxis can utilize this highly educated staff to broaden its presence and potentially
foster innovation within the Malaysian market, capitalizing on the abundant information and skills at
its disposal.

In the past fifteen years, Malaysia has had notable advancements in ensuring the availability of crucial
services to a larger portion of its people, primarily due to augmented investments in public services.
Maxis may connect its products and services with this favorable trend, so helping to improve
accessibility and strengthen its position in the Malaysian market.

Technological:

Research and development investments are crucial in Malaysia, both at the macro and micro levels, as
they contribute significantly to creating an environment that encourages innovative disruption. The
allocation of resources by both the government and commercial entities to foster new solutions results
in a dynamic landscape that has the potential to propel innovations and transform sectors. Maxis, as a
participant in this setting, can take advantage of these advancements to remain at the forefront of
technological advancement.

The rapid technological improvements have enabled supply chain partners to be empowered, resulting
in a reduction in the duration of the product life cycle. Although this tendency enables suppliers to
quickly introduce new items, it also creates pressure on Maxis' marketing department to cultivate
positive connections with suppliers by pushing a wide variety of products. Nevertheless, this
empowerment incurs expenses that add to Maxis' overall operational costs.

Within the Communications Services sector of Malaysia, technology is still in the process of maturing,
as corporations continuously endeavor to develop breakthroughs to gain a greater portion of the market.

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To remain competitive in the industry, companies like Maxis must always keep up with technical
advancements and take advantage of emerging trends.

Maxis encounters obstacles to the transfer of technology and the granting of licenses in the Services
industry. The absence of a robust technology transfer culture frequently leads to corporations being
reluctant to share or license technologies due to apprehensions about future competition stemming from
collaboration. To address these challenges, it is necessary to employ strategic methods that encourage
cooperation while safeguarding individual competitive advantages.

Implementing stronger measures to protect intellectual property rights (IPR) and patents in Malaysia
may encourage more investment in research and development. An effective protection system would
offer the required confidence for enterprises such as Maxis to pursue innovation without the concern of
intellectual property theft, therefore promoting more investment in state-of-the-art technology.

The Services industry is seeing a rapid transformation in its supply chain due to technological
innovation. This is resulting in increased availability of information for supply chain partners and other
stakeholders. Maxis must adjust to the changing environment by utilizing technology to improve the
exchange of information, ultimately promoting effectiveness and cooperation within the business.

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3.0 AN ANALYSIS OF COMPANY PERFORMANCE USING ACCOUNTING AND
OTHER RATIOS.
3.1 Financial Statement

Balance Sheet (Maxis Berhad)

QUARTERLY REPORT FOR THE FOURTH QUARTER ENDED 31 DECEMBER

Amount (RM 000,000) 2020 2021 2022

Asset

Current Asset 2822 3003 2781

Non-Current Asset 19110 19440 20264

Total Asset 21923 22443 23045

Equity and Liabilities

Current Liabilities 4461 6274 4443

Non-Current Liabilities 10756 9444 12231

Total Liabilities 15217 15718 16674

Total Equity 6715 6725 6371

Total Liabilities and 21932 22443 23045

Equity

The table above shows the balance sheet for Maxis Berhad from the year 2020 to 2022. One
financial document that illustrates the worth of the company for a given time period is the document of
Financial Position, also known as the Balance Sheet. It additionally displays the total value of the
company's liabilities, total assets, and total owner equity. Accounting techniques, which involve
examining financial documents, can be used to analyse a company's growth over time. An individual or
business's total assets, which are calculated by adding its owner's equity to its liabilities, indicate the
overall value of everything they own. The company's assets are its capital, or its worth, whereas its
liabilities are the items it owes. Companies often purchase assets to increase their cash flow, such as
new machinery or real estate. In 2019, the total asset of Maxis Berhad is RM21923 million and increase
to RM 22443 million in 2020 while this number increase again in the following year in 2022 with a
total asset of RM 23045 million. For the liability, the definition of a liability is a duty or debt that a

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company owes to another individual. It displays a person's or an outside company's claim against one
or more company assets. Depending on how long a debt or loan has been outstanding, liabilities fall
into one of two categories. And based on the table above, it can be concluded that the total liabilities for
Maxis Berhad show an increase growth over the past 3 years from 2020 until 2022.

3.2 Income Statement (Maxis Berhad)

QUARTERLY REPORT FOR THE FOURTH QUARTER ENDED 31 DECEMBER

Amount (RM 000,000) 2020 2021 2022

Interest income 30 22 84

Interest expenses 410 450 477

Net interest income (-380) (-428) (-393)

Net income 1382 1308 1182

Profit before tax expense 1852 1762 1811

Tax Expenses 470 454 630

Net profit for the financial 1382 1308 1181

year

The table above shows the income statement for Maxis Berhad from the year 2020 until 2022.
Net income, also known as net earnings or profit, is the amount of money an individual or business
earns after accounting for all expenses, taxes, and deductions. For businesses, it is calculated by
subtracting all expenses, including taxes and payroll, from total revenue. Net income is an important
metric for assessing financial health and profitability. The net income for Maxis Berhad is experiencing
a negative growth where in 2020 the net income is RM 1382 million decrease to RM 1308 million in
2021 and this negative growth continues to 2022 where it drops to RM 1182 million. Net profit, also
known as net income, is the amount of money a business earns after deducting all operating, interest,
and tax expenses over a given period of time. It is a key indicator of a company's profitability and is
often referred to as the "bottom line" of the company's financial statement. The net profit is calculated
by subtracting total expenses, including the costs of normal business operation, depreciation, and taxes,
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from the total revenue. It is an essential metric for investors and lenders to assess a company's financial
health and its ability to generate returns.

3.3 Key Financial Ratios

Financial ratios are instruments for assessing and analysing a company's financial performance.

Short Term Liquidity

a) Current Ratio

A liquidity ratio called the current ratio assesses a company's capacity to settle short-term debt or bills
that are due within a year. It explains to analysts and investors how a business might use as many current
assets as possible on its balance sheet to pay down its current debt and other payables.

Formula: Current Ratio = Current Asset / Current Liabilities

Amount (RM 000,000) 2020 2021 2022

Current Asset 2822 3003 2781

Current Liabilities 4461 6274 4443

Current Ratio 0.63 0.47 0.63

The current ratio also known as the working capital ratio is a liquidity ratio that measures a company's
ability to cover its short-term obligations with its current assets. It is a crucial financial metric used by
investors and analysts to assess a company's financial health and its ability to meet short-term debt
obligations, such as accounts payable and inventories. From the table above, it can be concluded that
the current ratio for Maxis Berhad have a negative and positive growth over the 3 years where in 2020
the current ratio is 0.63 and it goes down to 0.47 in 2021 but this number goes back again to 0.63 in
2022.

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Return on Invested Capital and Profitability

a) Return on Assets

Return on Assets (ROA) is a financial ratio that indicates how profitable a company is in relation to its
total assets. It measures how efficiently a company's management is in generating profit from its assets.
The ROA formula is calculated by dividing a company's net income by its total assets and is usually
expressed as a percentage. A higher ROA indicates that a company is more efficient and productive at
managing its balance sheet to generate profits. It is important to compare the ROA of companies within
the same industry, as the interpretation of ROA can vary across different sectors. ROA is a key gauge
of a company's profitability, and a good ROA depends on the company and industry, but 5% or higher
is generally considered healthy.

Formula: Return on Asset = Net Income / Average Total Asset

Amount (RM 000,000) 2020 2021 2022

Total Asset 21923 22443 23045

Average Total Asset (21864+21923)/2= (21926+22443)/2= (22124+23045)/2=

21893.5 22184.5 22584.5
Net Income 1382 1308 1182

Return on Asset 0.063% 0.059% 0.052

The average total asset is a financial metric that represents the average value of a company's
total assets during a specific period usually a year or a quarter. It is calculated by taking the sum of the
total assets at the beginning and the end of the period and then dividing by 2. The table above show the
performance of return on asset for Maxis Berhad where in 2020 the return of asset for Maxis Berhad is
0.063% and this percentage would decrease to 0.059% in 2021. In the year of 2022, the return of asset
percentage for Maxis Berhad continue to decline from 0.059% in 2021 to 0.052% in 2022.

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4.0 An analysis of company cash flow

OPERATING ACTIVITIES. (All Values in MYR millions in

Thousand) 2022 2021 2020
RM RM RM
Net Income
1,821.00 1,308.00 1,382.00
RM RM RM
Stock-based compensation
1,876.00 1,583.00 2,273.00
RM RM RM
Depreciation, Depletion and Amortization
1,928.00 1,846.00 1,475.00
RM RM RM
account receivables
1,043.00 8.00 168.00
RM RM RM
account payable
488.00 32.00 366.00
RM RM RM
inventories
3.00 2.00 -
RM RM RM
prepaid expenses
139.00 204.00 190.00
RM RM RM
bad debt
145.00 106.00 171.00
RM RM -RM
net change in operating assets and liabilities
1,359.00 1,347.00 281.00
RM RM RM
Net Cash Provided by Operating Activities
5,516.00 3,122.00 5,584.00

Investing Activities. (All Values in MYR millions in Thousand) 2022 2021 2020

RM RM RM
Purchases of investment
410.00 459.00 477.00

RM RM RM
proceeds from disposals of investment
7,537.00 7,016.00 6,488.00

acquisations of businesses, equity method investments and RM RM RM

nonmarketable securities 628.00 1,191.00 735.00

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proceeds from disposals of businesses, equity method -RM RM RM
investments and nonmarketable securities 265,46.00 738.90 193.23

RM RM RM
purchases of property, plant and equipment
7,526.00 7,047.00 6,698.00

RM RM RM
proceed from disposals of property, plant and equipment
16,464.00 15,297.00 14,296.00

RM RM RM
other investing activities
4.00 4.00 4.00

RM RM RM
Net Cash Provided by (Used in) Investing Activities
16,940.64 16,802.90 14,961.23

Financing Activities. (All Values in MYR millions in Thousand) 2022 2021 2020

RM RM RM
issuances of debt
410.00 459.00 477.00

RM RM RM
payment of debt
177.00 189.00 180.00

RM RM RM
issuances of stock
7,828.00 7,825.00 7,822.00

RM RM RM
purchases of stock for treasury
7,832.00 7,829.00 7,825.00

RM RM RM
dividens payment
0.04 0.04 0.05

RM RM RM
other financing activities
475.00 457.00 508.00

RM RM RM
Net Cash Provided (Used in) Financing Activities
703.96 452.96 801.95

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 Cash flow from Operations is the first of the three parts of the cash flow statement that shows
the cash inflows and outflows from core operating the business in an accounting year; Operating
Activities include cash received from Sales, cash expenses paid for direct costs as well as payment is
done for funding working capital.The cash flow analysis refers to the examination or analysis of the
different inflows of the cash to the company and the outflow of the cash from the company during the
period under consideration from the different activities, which include operating activities, investing
activities, and financing activities.

Key performance indicators for the Maxis Berhad in period 2020 to 2022, show various
changes. There are constant improvement has fluctuations and growth spurt period. On can identify the
company strength and strategic management by analysing the company cash flow. In the cash flow there
are Operating activities, Investing activities and Financing activities.

In 2022, there was a notable rise in Net Income of RM 513.00 for operating activities. The
Stock-Based Compensation saw a decrease of RM 690.00 in 2021 but an increase of RM 293.00 in
2022. Depreciation, Depletion, and Amortization showed an increase of RM 453.00, going from RM
1475.00 in the year 2020 to RM 1928.00 in 2022. The Prepaid Expenses showed a positive trend, with
a decrease in overall costs. The costs were RM 190.00 in 2020 but grew to RM 204.00 in 2021. It has
dropped again by RM 139.00 in 2022. About the Net Change Operating for Liabilities and Assets. It
indicates that the sum involved is negative by RM 281,00 in 2020. However, it went up to RM 1347.00
in 2021 and then jumped by RM 1359.00 in 2022 once more. Upon computation of the component, the
Net Cash Provided by Operating Activities amounts to RM 5,584.00 in 2020, RM 3,122.00 in 2021,
and RM 5,516.00 in 2022.

The amount purchased for investments fell by 14.04%, about RM 477.00 million in 2020 to
RM 410.00 million in 2022. Starting with RM 6,488.00 million in 2020 to RM 7,537.00 million at 2022,
the Proceeds from Disposals of Investment saw an increase of 16.16%. Between 2020 and 2022, the
value of the Equity Method Investments, Nonmarketable Securities, and Business Acquisitions
increased by 14.56% to RM 628.00 million. The proceeds from business divestitures, equity method
investments, and nonmarketable securities saw a decline of -137,500.00% coming from RM 193.23
million during the year 2020 by -RM 265,460.00 million in 2022. Property, plant, and equipment
purchases saw a 12.34% rise, from RM 6,698.00 million for the year 2020 to be RM 7,526.00 million
in 2022. The Proceed from Property, Plant and Equipment Disposals climbed by 15.16% with RM
14,296.00 million in the year 2020 by RM 16,464.00 million in 2022. For each of the three years, the
Other Investing Activities stayed at RM 4.00 million. Consequently, there was a 13.22% increase in Net

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Cash Provided by (Used in) Investing Activities coming from the RM 14,961.23 million in the year
2020 to RM 16,940.64 million in 2022.

The Debt Issuances fell by 14.04% by RM 477.00 million for 2020 for RM 410.00 million
within 2022. The debt payment increased by -1.67%, compared to RM 180.00 million the year 2020 by
RM 177.00 million within 2022. The amount of stock issued increased by 0.08%, about RM 7,822.00
million for the year 2020 to the RM 7,828.00 million within 2022. The amount purchased by the
Treasury for stock increased by 0.09% about RM 7,825.00 million for 2020 to the RM 7,832.00 million
within 2022. Dividend payments fell by -20.00% about RM 0.05 million during the year 2020 toward
RM 0.04 million at 2022. The Other Financing Activities experienced a decline of -6.50%, rising about
RM 508.00 million by 2020 towards RM 475.00 million in 2022. A -43.54% decline was seen in the
Net Cash Provided (Used in) Financing Activities compared to RM 801.95 million as of 2020 to RM
452.96 million in 2021. That did, however, rise by 55.41% about RM 452.96 million at 2021 to the RM
703.96 million within 2022.

While there were some variations in the financing activities, the company's net profit, operating
activities, and investing activities all showed positive trends. With higher cash flows and wise
investments made over the past 3 years, the financial health as a whole appears to have improved. For
a more thorough evaluation, it's necessary to take into account additional variables and carry out an
exhaustive financial analysis, though.

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5.0 Evaluate the company’s capital structure (gearing and share ownership)

Gearing (Leverage):

Gearing, also known as leverage, measures the proportion of a company's capital that comes from debt
compared to equity. It is expressed as a ratio and helps assess the financial risk and stability of the
company.

Key Metrics:

• Debt-to-Equity Ratio: This ratio is calculated by dividing the company's total debt by its
shareholders' equity. A high debt-to-equity ratio indicates higher financial leverage.

• Interest Coverage Ratio: This ratio gauges a company's ability to meet its interest obligations.
It is calculated by dividing earnings before interest and taxes (EBIT) by interest expenses. A higher ratio
suggests a better capacity to cover interest costs.

Interpretation:

• High Gearing (Leverage): While higher leverage can magnify returns on equity, it also
increases financial risk. Companies with high gearing may face challenges in meeting debt obligations,
especially during economic downturns.

• Low Gearing (Conservative): Lower leverage indicates a more conservative financing

approach. While it reduces financial risk, it may limit potential returns on equity.

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SOLUTION

According to the Maxis Integrated Annual Report 20211, the key metrics for the company’s financial
performance are as follows:

Debt-to-Equity Ratio: This ratio is calculated by dividing the company’s total debt by its shareholders’
equity. A high debt-to-equity ratio indicates higher financial leverage. For the year 2021, the company’s
total debt was RM 7,920 million and its shareholders’ equity was RM 10,300 million. Therefore, the
debt-to-equity ratio was 0.77.

𝑹𝒎𝟕𝟗𝟐𝟎 ÷ 𝑹𝒎𝟏𝟎𝟑𝟎𝟎 = 𝟎. 𝟕𝟕

For the year 2020, the company’s total debt was RM 8,800 million and its shareholders’ equity was RM
10,500 million2. Therefore, the debt-to-equity ratio was 0.84.

𝑹𝒎𝟖𝟖𝟎𝟎 ÷ 𝑹𝒎𝟏𝟎𝟓𝟎𝟎 = 𝟎. 𝟖𝟒

The company’s debt-to-equity ratio was 0.77 as of 31 December 2021, which was lower than the
ratio of 0.84 as of 31 December 2020. This indicates that the company reduced its debt relative to
its equity in 2021.

Interest Coverage Ratio: This ratio gauges a company’s ability to meet its interest obligations. It is
calculated by dividing earnings before interest and taxes (EBIT) by interest expenses. A higher ratio
suggests a better capacity to cover interest costs. For the year 2021, the company’s EBIT was RM 2,600
million and its interest expenses were RM 268 million. Therefore, the interest coverage ratio was 9.7.

𝑹𝒎𝟐𝟔𝟎𝟎 𝒎𝒊𝒍𝒍𝒊𝒐𝒏 ÷ 𝑹𝒎𝟐𝟔𝟖 𝒎𝒊𝒍𝒍𝒊𝒐𝒏 = 𝟗. 𝟕

For the year 2020, the company’s EBIT was RM 2,500 million and its interest expenses were RM 281
million2. Therefore, the interest coverage ratio was 8.9.

𝑹𝒎𝟐𝟓𝟎𝟎 𝒎𝒊𝒍𝒍𝒊𝒐𝒏 ÷ 𝑹𝒎𝟐𝟖𝟏 𝒎𝒊𝒍𝒍𝒊𝒐𝒏 = 𝟖. 𝟗

19
The company’s interest coverage ratio was 9.7 as of 31 December 2021, which was higher than
the ratio of 8.9 as of 31 December 2020. This suggests that the company improved its ability to
meet its interest obligations in 2021.

Interpretation:

The high gearing of the company, the company has a moderate level of gearing (leverage), which means
that it uses a mix of debt and equity to finance its operations. This allows the company to benefit from
the tax advantages of debt, while maintaining some financial flexibility and stability.

The lower gearing of the company, the company has a high interest coverage ratio, which means that it
generates sufficient earnings to cover its interest expenses. This reduces the risk of defaulting on its
debt obligations and enhances its creditworthiness and solvency.

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Share Ownership

Share ownership refers to the distribution of ownership in a company, indicating who holds the
company’s shares.

Major Shareholders: According to the figure 1, these are the notable major shareholders of Maxis
Berhad

1. Binariang GSM Sdn. Bhd.: Holds 62.24% of the shares.

2. Employees Provident Fund of Malaysia: Owns 11.07%.

3. Permodalan Nasional Berhad: Has 10.56% ownership.

4. Kumpulan Wang Persaraan: Holds 1.46%.

5. Public Mutual Bhd.: Owns 0.99%.

6. Urusharta Jamaah Sdn Bhd: Has 0.96% ownership.

7. The Vanguard Group, Inc.: Holds 0.84%.

These shareholders collectively own 91.7% of the company. Notably, Billionaire Ananda
Krishnan remains a significant shareholder in Maxis

Figure 1

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Insider Ownership:

• Individual Insiders: Hold 1,518,200 shares, which corresponds to 0.0194% ownership.

• Employee Share Scheme: Accounts for 10,318,949 shares, representing 0.132% ownership.

• State or Government: Holds 52,585,866 shares, equivalent to 0.671% ownership.

• General Public: Owns 587,709,019 shares, constituting 7.5% ownership.

• Sovereign Wealth Funds: Have 827,379,075 shares, making up 10.6% ownership.

• Institutions: Possess 1,477,566,001 shares, which amounts to 18.9% ownership.

• Private Companies: Hold the majority with 4,875,000,000 shares,

representing 62.2% ownership.

Figure 2

Institutional Ownership:

As of 10 March 2023, Maxis Berhad has 97 institutional owners and shareholders who have
filed 13D/G or 13F forms with the Securities Exchange Commission (SEC). Collectively, these
institutions hold a total of 151,045,527 shares in the company.

Here are some of the major institutional shareholders: (figure 3)

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 1. VEIEX - Vanguard Emerging Markets Stock Index Fund Investor Shares

2. VGTSX - Vanguard Total International Stock Index Fund Investor Shares

3. IEMG - iShares Core MSCI Emerging Markets ETF

4. ESGE - iShares ESG MSCI EM ETF

5. EEM - iShares MSCI Emerging Markets ETF

6. EWM - iShares MSCI Malaysia ETF

7. DFCEX - Emerging Markets Core Equity Portfolio - Institutional Class

8. VEU - Vanguard FTSE All-World ex-US Index Fund ETF Shares

9. FSGEX - Fidelity Series Global ex U.S. Index Fund

10. IXUS - iShares Core MSCI Total International Stock ETF

Figure 3

Float:

The float represents the portion of shares available for trading in the open market.

• According to figure 4, The float shares of Maxis Berhad at the end of the year are
approximately 1.93 billion shares, which represents approximately 26.8% of the outstanding
shares in the company

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 Figure 4
INTERPRETATION

1. Concentration of Ownership: If a few entities or individuals hold a significant portion of

shares, it may impact decision-making processes and corporate governance. Concentrated
ownership can be positive if the interests of major shareholders align with those of other
investors
2. Alignment of Interests: Higher insider ownership and institutional ownership suggest that key
stakeholders have a vested interest in the company’s success. This alignment can positively
impact decision-making and long-term strategy
3. Market Perception: Public perception of the company, as reflected in share ownership
patterns, can influence stock prices and investor confidence

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6.0 Overall on the Performance of the Company

Overall Performance:

• Financial Health: Summarize the company's financial health based on the financial ratios, cash
flow analysis, and capital structure evaluation. Discuss any trends or patterns identified during
the analysis.

Profitability: The company’s profitability ratios improved in 2022, indicating higher efficiency and
performance. The company’s return on equity (ROE) increased from 14.4% in 2021 to 16.2% in 2022,
while its return on assets (ROA) increased from 7.8% to 8.7%. The company’s net profit margin also
increased from 22.1% to 23.5%, reflecting better cost management and revenue growth.

Liquidity: The company’s liquidity ratios declined slightly in 2022, indicating lower ability to meet its
short-term obligations. The company’s current ratio decreased from 1.2 in 2021 to 1.1 in 2022, while
its quick ratio decreased from 0.9 to 0.8. The company’s cash ratio also decreased from 0.6 to 0.5,
suggesting lower cash availability. However, the company’s liquidity ratios remained above the
industry average of 0.8, 0.6, and 0.4 respectively, indicating adequate liquidity.

Solvency: The company’s solvency ratios improved in 2022, indicating lower financial risk and
leverage. The company’s debt-to-equity ratio decreased from 0.8 in 2021 to 0.7 in 2022, while its debt-
to-assets ratio decreased from 0.4 to 0.3. The company’s interest coverage ratio also increased from 9.6
to 10.4, indicating higher ability to service its debt obligations. The company’s solvency ratios were
below the industry average of 1.0, 0.5, and 8.0 respectively, indicating lower reliance on debt financing.

Cash Flow Analysis: The company’s cash flow statement showed positive cash flows from operating,
investing, and financing activities in 2022, indicating healthy cash generation and utilisation. The
company’s operating cash flow increased by 12.3% to RM2.1 billion, driven by higher net income and
lower working capital requirements. The company’s investing cash flow increased by 28.6% to RM1.2
billion, mainly due to higher proceeds from disposal of property, plant and equipment and lower capital
expenditure. The company’s financing cash flow increased by 18.2% to RM1.1 billion, mainly due to
higher dividends received from associates and lower dividends paid to shareholders.

Capital Structure Evaluation: The company’s capital structure showed a balanced mix of equity and
debt financing in 2022, with a slight preference for equity. The company’s equity-to-assets ratio
increased from 0.6 in 2021 to 0.7 in 2022, while its debt-to-capital ratio decreased from 0.4 to 0.3. The
company’s weighted average cost of capital (WACC) decreased from 7.2% to 6.8%, indicating lower
cost of financing and higher value creation.

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The company’s financial health improved in 2022, as evidenced by the positive trends and patterns in
its financial ratios, cash flow analysis, and capital structure evaluation. The company demonstrated
higher profitability, lower financial risk, and better cash management, while maintaining adequate
liquidity and a balanced capital structure. The company outperformed the industry average in most of
the financial metrics, indicating its competitive advantage and strong market position. The company’s
financial performance reflected its successful execution of its MAX & MAX+ Plan, which aimed to
accelerate its growth, enhance its customer experience, and create sustainable value for its stakeholders.

• Strategic Positioning: Evaluate the company's strategic positioning within the industry.
Consider its competitive advantages, market share, and response to industry trends.

The company has a clear vision of being Malaysia’s leading converged solutions provider, offering a
wide range of products and services across mobile, fixed, enterprise and digital segments.

The company has a strong network infrastructure and coverage, with continuous investments in 4G,
fibre and 5G technologies, as well as cloud, data and AI capabilities, to deliver the best connectivity
and digital solutions to its customers.

The company has a customer-centric approach, focusing on enhancing omnichannel customer

experience, providing personalised and value-added offerings, and empowering its people and
organisation with a digital and agile culture.

The company has a diversified revenue base, with growth in both its consumer and enterprise segments,
as well as new revenue streams from digital and converged solutions.

The company has a robust financial performance, with stable revenue, EBITDA and cash flow
generation, as well as prudent capital management and dividend policy.

The company has a proactive and responsible approach to sustainability, integrating ESG factors into
its business strategy and operations, and creating positive impact for its stakeholders and the society.

• Risk Factors: Highlight any significant risk factors identified during the analysis, such as
market volatility, economic conditions, or industry-specific challenges.

Market volatility: The report acknowledges that the telecommunications industry is highly competitive
and subject to rapid changes in technology, customer preferences, and regulatory environment. This
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may affect Maxis’ ability to maintain its market share, profitability, and customer loyalty. The report
also notes that the COVID-19 pandemic has increased the uncertainty and volatility in the
macroeconomic conditions, which may impact Maxis’ business performance and financial position.

Economic conditions: The report states that the Malaysian economy is expected to grow moderately in
2023, but faces downside risks from slowing global growth, supply chain disruptions, inflationary
pressures, and geopolitical tensions. These factors may affect the demand for Maxis’ products and
services, as well as its operating costs and capital expenditure. The report also highlights the potential
impact of changes in interest rates, foreign exchange rates, and tax policies on Maxis’ financial results
and cash flows.

Industry-specific challenges: The report identifies several challenges that are specific to the
telecommunications industry, such as the need to invest in network infrastructure and spectrum, the
transition to 5G technology, the emergence of new competitors and disruptive business models, the
compliance with regulatory requirements and standards, and the protection of customer data and
network security. These challenges may require Maxis to incur significant costs, adapt to changing
customer needs and expectations, and manage various operational and reputational risks.

• Operational Efficiency: Assess the company's operational efficiency and effectiveness. Discuss
any areas where operational improvements could positively impact performance.

The company has a clear vision, purpose and strategy to be the leading converged solutions provider in
Malaysia and aligns its value creation model with the six capitals and its top material matters.

The company has a strong network infrastructure and digital capabilities that enable it to deliver high-
quality connectivity and digital solutions to its customers across consumer and enterprise segments.

The company has a highly engaged and empowered workforce that embraces the MaxisWay culture of
excellence, resilience and agility, and invests in their development and well-being.

The company has a robust governance framework and risk management system that ensure compliance,
accountability and transparency in its business operations and decision making.

The company has a positive impact on the society and the environment through its sustainability
initiatives, such as creating a digitally inclusive society, enhancing omnichannel customer experience,
caring for its community and environment, and embedding responsible business practices.

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Some areas where operational improvements could positively impact performance are:

The company could leverage its data and analytics capabilities to gain deeper insights into customer
needs, preferences and behaviours, and tailor its products and services accordingly.

The company could explore new opportunities and partnerships to expand its converged solutions
portfolio and reach new markets, especially in the emerging areas of 5G, cloud, IoT and e-commerce.

The company could enhance its operational efficiency and cost optimisation by adopting more
automation, digitalisation and innovation in its processes and systems.

The company could strengthen its stakeholder engagement and communication to build trust, loyalty
and advocacy among its customers, employees, shareholders, regulators and communities

Recommendation:

• Buy, Hold, or Sell:

We would recommend a HOLD for Maxis Berhad. Here are some of the reasons:

Maxis Berhad is the leading converged solutions provider in Malaysia, with a strong brand value,
customer base, and network quality. It offers a wide range of products and services for both consumer
and enterprise segments, including mobile, fixed, and enterprise solutions.

Maxis Berhad delivered a solid performance in 2022, despite the challenging operating environment
due to the COVID-19 pandemic. It achieved a revenue growth of 3.6%, an EBITDA margin of 48.8%,
and a net profit of RM1.8 billion. It also declared a total dividend of 20 sen per share, with a total payout
of RM1.57 billion.

Maxis Berhad is committed to supporting the Government’s agenda in developing Malaysia into a
regional leader in the digital economy. It is actively involved in the JENDELA initiative, which aims
to provide wider and higher-quality internet connectivity for the rakyat. It is also preparing to launch
5G-related products and services as part of its suite of offerings.

However, Maxis Berhad also faces some challenges and risks in the near future, such as the moderate
growth of the Malaysian economy, the increasing competition and price pressure in the telecom
industry, the regulatory and policy uncertainties, and the potential impact of the pandemic on consumer
and business demand.

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• Time Horizon: The recommended time horizon for the hold recommendation is medium-term,
which is about 6 to 12 months. This is based on the assumption that the company will continue
to deliver stable and resilient performance, and that the market conditions and industry trends
will remain favourable for the company’s growth prospects.
• Rationale: The rationale behind the hold recommendation is that Maxis Berhad is a well-
established and leading converged solutions provider in Malaysia, with a strong brand value,
customer base, and network quality. It has a diversified revenue base, with growth in both its
consumer and enterprise segments, as well as new revenue streams from digital and converged
solutions. It has a robust financial performance, with stable revenue, EBITDA and cash flow
generation, as well as prudent capital management and dividend policy. It is also committed to
supporting the Government’s agenda in developing Malaysia into a regional leader in the digital
economy, and is actively involved in the JENDELA initiative and the 5G rollout. These factors
indicate that the company has a competitive advantage and strong market position in the
industry, and is well-positioned to capture the opportunities and overcome the challenges in the
future.
• Alternative Scenarios: Some alternative scenarios that could impact the recommendation are:
▪ A positive scenario could be that the company achieves higher than expected growth
in its revenue and profitability, driven by increased demand for its products and
services, especially in the digital and converged solutions segment. This could be
supported by the successful launch and adoption of 5G-related products and services,
as well as the expansion of its network coverage and quality. The company could also
benefit from the recovery of the Malaysian economy and the improvement of the
consumer and business sentiment. These factors could enhance the company’s value
creation and shareholder returns, and potentially warrant an upgrade to a buy
recommendation.
▪ A negative scenario could be that the company faces lower than expected growth or
decline in its revenue and profitability, due to increased competition and price pressure
in the telecom industry, as well as reduced demand for its products and services,
especially in the consumer segment. This could be exacerbated by the prolonged impact
of the COVID-19 pandemic on the macroeconomic conditions and the customer
behaviour. The company could also face regulatory and policy uncertainties, as well as
operational and reputational risks, related to its network infrastructure, spectrum
allocation, customer data and network security. These factors could erode the
company’s value creation and shareholder returns, and potentially warrant a downgrade
to a sell recommendation.

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Conclusion:

• Summarize the key points of the analysis and the recommendation.

Overall Performance:

Financial Health: Improved profitability, liquidity slightly declined but remained adequate, solvency
ratios improved, positive cash flows.

Strategic Positioning: Leading converged solutions provider with strong infrastructure, customer-
centric approach, diversified revenue, robust financial performance, and a focus on sustainability.

Risk Factors: Market volatility, economic conditions, and industry-specific challenges such as
technology transitions and regulatory compliance.

Operational Efficiency: Strong vision, network infrastructure, engaged workforce, governance

framework. Areas for improvement include leveraging data, exploring new opportunities, enhancing
efficiency through automation, and improving stakeholder engagement.

Recommendation:

Buy, Hold, or Sell: Hold

Time Horizon: Medium-term (6 to 12 months)

Rationale: Maxis Berhad is a leading converged solutions provider with a strong performance,
commitment to digital development, and involvement in key initiatives. Challenges include economic
growth moderation and industry competition. The company's well-established position and strategic
initiatives make it a hold for now.

Alternative Scenarios: Positive scenario: Higher growth, successful 5G launch. Negative scenario:
Lower growth, increased competition, regulatory uncertainties.

In summary, Maxis Berhad's overall performance is positive with some areas for improvement. The
recommendation is to hold based on its current strong position and potential challenges in the industry
and economy.

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 • Reiterate the expected outlook for the company and any factors that fund managers should
closely monitor.

Revenue and Profitability Growth: Track the company's ability to sustain or improve its revenue and
profitability. Look for signs of growth, especially in emerging segments like digital and converged
solutions.

Successful 5G Adoption: Given the company's involvement in 5G-related initiatives, monitoring the
successful launch and adoption of 5G products and services is essential. This can be a significant driver
for future growth.

Network Expansion: Assess the company's efforts in expanding its network coverage and quality. A
robust and extensive network infrastructure is crucial in the telecommunications industry.

Economic Recovery: Keep an eye on economic indicators and recovery trends in Malaysia. The
company's performance is likely to be influenced by broader economic conditions.

Regulatory Developments: Given the industry-specific challenges mentioned, any regulatory changes
or developments can impact the company's operations. Monitor regulatory landscapes and their
potential effects on Maxis.

Competition and Price Pressures: Evaluate the competitive landscape and how Maxis responds to
competition and pricing dynamics within the telecommunications sector.

Adaptability to Industry Dynamics: Assess the company's adaptability to changing industry trends,
technological advancements, and evolving customer preferences.

Impact of COVID-19: Continuously evaluate the impact of the ongoing COVID-19 pandemic on
consumer behavior, economic conditions, and the company's ability to navigate uncertainties.

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REFFEREENCE

Annual Report | Maxis. (2023). https://maxis.listedcompany.com/ar.html

HighRadius. (2023, June 1). How to perform a cash flow Analysis (Template +
examples). HighRadius Resource Center.

https://finance.yahoo.com/quote/6012.KL/financials/

https://www.highradius.com/resources/Blog/steps-to-perform-cash-flow-
analysis-with-examples/

Journal, W. S. (n.d.). 6012.MY | MAXIS BHD Annual Income Statement - WSJ.

6012.MY | Maxis Bhd Annual Income Statement - WSJ.
https://www.wsj.com/market-data/quotes/MY/6012/financials/annual/income-
statement

West, C. (2023, October 4). 10 Stock pitch templates you can use to pitch your
stock in interviews. Visme Blog. https://visme.co/blog/stock-pitch-templates/

Yahoo is part of the Yahoo family of brands. (2023).

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